Insurance Bought with Medicaid $$ Has Extra Benefit

by David Pittman David Pittman,Washington Correspondent, MedPage Today
July 03, 2013

Using Medicaid dollars to purchase private insurance in the Affordable Care Act's (ACA) health insurance exchanges could reduce "churning" in and out of Medicaid by two-thirds, researchers said.

Such a hypothetical "premium-support" model would produce rates of continuous insurance eligibility around 85% in Arkansas and 78% in Ohio (P<0.001), Sara Rosenbaum, JD, of the George Washington University School of Public Health and Benjamin Sommers, MD, PhD, of the Harvard School of Public Health, found.

Some states have sought to use Medicaid money to allow newly eligible beneficiaries in an expanded Medicaid program to purchase insurance on the ACA's exchanges rather than give them traditional Medicaid, the authors noted in the July 4 New England Journal of Medicine. This option could provide a smoother transition between Medicaid and the private insurance market, they wrote.

Meanwhile, only about 55% of adults would maintain continuous insurance eligibility over 2 years under the ACA's baseline, which provides traditional Medicaid for those earning up to 138% of the federal poverty line.

The 2010 health law seeks to provide Medicaid coverage to everyone up to 138% of the federal poverty level, while exchanges are open to anyone with income as low as 100% of poverty with subsidies up to 400% of poverty.

"Without health plans spanning both markets, shifts in financing could disrupt coverage and care," they wrote. "Buying exchange plans with Medicaid funds might shield families from the effect of small income shifts, since they could keep their plans and providers regardless of whether Medicaid or federal premium subsidies were paying the bill at any given moment."

Rosenbaum and Sommers reported 2 years ago in Health Affairs that low-income adults experience so much fluctuation in income that they could frequently slip in and out of eligibility for the ACA's Medicaid expansion. As many as 28 million annually could "churn" across the eligibility line.

But after last summer's Supreme Court decision making that expansion optional for states, some states like Arkansas suggested using Medicaid money to buy private health insurance, which is now possible under the ACA's insurance exchanges because they create a viable individual insurance marketplace. Other states, including Ohio, Pennsylvania, and Iowa, have proposed similar programs, but none besides Arkansas have received final approval from the Centers for Medicare and Medicaid Services.

Rosenbaum and Sommers used the 2008 Survey of Income and Program Participation to obtain information on income, demographics, and insurance coverage. They tracked month-to-month variation in income as a percentage of the federal poverty level and examined what percentage of adults ages 19 to 63 would maintain consistent eligibility for coverage at 6 months, 1 year, 18 months, and 2 years.

States like Arkansas, Texas, South Carolina, Louisiana, and others have virtually no coverage for childless adults and extremely low income requirements for parents. Therefore, except for children and those who are pregnant, elderly, or have a severe disability, many low-income residents are without coverage in states that decline to expand their Medicaid programs. Roughly half -- 27 -- of states have opted not to expand Medicaid under the ACA at this time.

"Without the Medicaid expansion, the poorest Americans will remain uninsured, since subsidized coverage through the exchanges is available only for U.S. citizens with incomes above 100% of the federal poverty level," the authors wrote.

There are advantages to the premium-support model, they said. For example, patients will change provider networks less often if they have more stable coverage. Also, more private coverage rather than more Medicaid coverage could mean higher payments to providers.

"This advantage will materialize only if insurers' provider networks agree to care for a new patient population, but networks that don't already treat Medicaid beneficiaries may resist this expanded line of business," the authors wrote.

But greater private coverage translates into higher costs for the federal government. The Congressional Budget Office estimates using tax credits for purchasing coverage in exchanges will cost $9,000 per person annually -- about 50% more than the $6,000 per person in Medicaid costs.

The Department of Health and Human Services has also yet to answer key questions about premium assistance. Will private insurance companies be required to contract with safety-net providers? Can parents enroll in plans that are different from their children?

"If the challenges can be resolved and the approach encourages widespread state participation in expanding Medicaid, the U.S. healthcare system will be a far better place for our poorest citizens," the authors wrote.

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